International credit rating agency Moody's Ratings has completed its latest periodic review of Azerbaijan and reassessed the rationale supporting the country's current credit ratings, APA-Economics reports.
According to the agency, the key factors supporting Azerbaijan's Baa3 long-term issuer rating are its strong net creditor position, underpinned by the substantial financial assets managed by the State Oil Fund of Azerbaijan (SOFAZ), the government's fiscal resilience, and the gradual improvement of macroeconomic policy. Moody's believes these financial reserves reduce the government's liquidity and external risks while enabling countercyclical fiscal policy during economic shocks.
The agency noted that although progress has been made in economic diversification, the country's heavy dependence on the oil and gas sector, long-term institutional and governance weaknesses, and geopolitical risks stemming from relations with Armenia remain the main constraints on Azerbaijan's credit profile.
Moody's stated that Azerbaijan's real GDP contracted by 0.3% year-on-year in the first quarter of 2026, while economic growth virtually stalled during the first five months of the year. According to the agency, declining oil production was offset by growth in the non-oil sector. Although the rapid expansion in the construction sector driven by post-conflict reconstruction has slowed, information and communication technologies, tourism, and manufacturing continue to support economic activity.
The rating agency forecasts Azerbaijan's economic growth at around 1.5% in 2026 and 2–2.5% over the medium term. Moody's believes that the development of the non-oil sector, digital infrastructure projects, the expansion of regional transport connectivity, and reforms in public financial management, banking sector regulation, and fiscal oversight will support economic growth.
According to the agency, the government's policy of reducing the non-oil budget deficit is strengthening fiscal sustainability. At the same time, SOFAZ's assets continue to grow and reached 97% of GDP in 2025. Moody's expects oil prices to remain elevated in 2026, generating additional oil revenues, increasing the Oil Fund's assets, and further strengthening the government's resilience to economic shocks.
The agency also noted that expanding economic ties between Azerbaijan and Armenia, progress on regional transport corridors, and continued international support for the peace process are helping to gradually reduce geopolitical risks and strengthen regional connectivity, even though a formal peace agreement has not yet been signed.
Moody's emphasized that Azerbaijan's long-term issuer rating remains at Baa3.
The agency added that the current document does not constitute a new rating decision and merely reflects the results of its periodic assessment of Azerbaijan's credit profile.
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